Prosecutors used real estate investment guru Rick Koerber’s own words against him in a federal court trial on Wednesday, playing recordings in which Koerber said his businesses never made annual profits and that some investor monies or loans were being used to pay promised returns.
Koerber is on trial on allegations that he operated a Ponzi scheme from 2005 through 2007, when his Utah County businesses took in about $100 million in investment monies. He allegedly used about half of that to pay interest owned to investors because the real estate investments weren’t generating profits. Investors were owed more than $40 million when the businesses stopped making interest payments in 2007.
In a February 2009 interview with FBI Special Agent Cameron Saxey and IRS Special Agent Ron Marker, Koerber admitted that his businesses that bought homes for rentals or resales didn’t make money.
“I don’t believe that [in] any year it generated a profit,” Koerber said in an audio recording played in court. Koerber is on trial on 18 charges related to his operation of Founder’s Capital and FranklinSquires Cos. and related entities.
Koerber told the agents that company insiders who had invested or made loans were aware that “money we had borrowed was being used as part of the money we were using to pay interest.”
Prosecutors contend that Koerber committed fraud when he took in investments by promising returns of up to 5 percent a month but then used some of their monies to pay interest, in what’s known as a Ponzi scheme.
Koerber denies the allegations, and his defense attorney has argued his companies held properties worth $127 million before the real estate crash.